The new act governing motor liability insurance entered into force on 1 January 2017. The complete reform of the act makes the existing regulations clearer and less equivocal.
In the new law, deficiencies in the old law were corrected and at the same time future changes were anticipated, for example, the increase in the automation of driving. The basic principles of the law remain unchanged. The basic principles are the scope, the obligation to insure, and the principles and reimbursement benefits of compensating damage.
However, the change in the law brings many practical changes. For example, the penalties for failing to insure will increase and victims' legal protection will improve. In addition, insurance companies are now able to take claims history more flexibly into account in their products.
Do I need to do something to my motor liability insurance as a result of this new law?
No, you do not. The new law does not require any action from policy holders.
What are the main changes to the law?
The penalties for failing to insure your vehicle become stiffer. It remains prohibited to drive an uninsured vehicle, and the police can remove its registration plates immediately. Penalty payments will also be larger than before. The new law improves the status of victims, because time limits for claims handling were introduced.
The law makes it possible to use the insurance and claims histories of policy holders more comprehensively than before in insurance pricing. For example, the claims history of one vehicle can be taken into account in the pricing of more than one vehicle and the claims histories of a number of vehicles can be taken into account in the pricing of one vehicle's insurance with the same owner. This means that the claims history does not necessarily have to start at zero with each new vehicle.
When did the new law come into force?
January 1st, 2017.
The exception is the section on medical expenses, which came into force in August 2016.
Why was the law being reformed?
The old act governing motor liability insurance entered into force in 1960, and the content of the law has gradually become obsolete.
How has the law been reformed? What was the aim of the reform?
The aim of the complete reform of the Act governing motor liability insurance was to make its content structure clearer and less equivocal than before. Additionally, established practices that have so far been missing from the law were now included.
The new law clarifies and improves the position and rights of policy holders and victims. The law also takes into account future needs, such as the increase in self-driving cars.
The new act aims to promote development and competition in markets. In practice, the reform gives the insurance industry the opportunity to develop new products.
The basic principles of the law remained the same, however. The basic principles are the scope, the obligation to insure, and the principles and reimbursement benefits of compensating damage.
What happens if a vehicle's owner fails to take out obligatory motor liability insurance?
The consequences of failing to insure one's vehicle become more severe as a result of the new law:
The size of the penalty fee is affected by the period of time the vehicle has been uninsured, whether the failure to insure has been deliberate and repeated as well as whether the vehicle has been driven in traffic. The penalty fee for failing to insure is raised in the new law.
Why are the consequences of failing to insure becoming more severe?
Damage caused to an innocent party by an uninsured vehicle is paid out from a common fund, which means that other policy holders ultimately have to pay for that damage. The better vehicles are insured, the less we have to pay for damage caused by others.
Is there a change to the insurance obligation in the new law?
The new law does not change the obligation to insure one's vehicle.
The new law, however, exempts from the insurance obligation lightweight unregistered vehicles intended exclusively for use by disabled persons.
In addition, it is no longer necessary to take out motor liability insurance for vehicles that have been withdrawn from use. However, it is worth noting that in this case the insurance must be cancelled separately. If the motor liability insurance has been cancelled, it has to be taken out again before informing Trafi that the vehicle is back on the road.
Do light electric mobility devices have to be insured?
There are no changes for insuring light electric mobility devices, such as electric balance boards and scooters. Most of these still do not need to be insured. Their speed, power and vehicle class are the deciding factors in this. Read more about insuring light electric mobility devices.
Does the compensation for traffic accidents change with the new law?
Very little from the point of view of consumers. The aim was to maintain the level of comprehensiveness and protection offered by motor liability insurance, even though there have been some changes in the scope of the insurance. However, maximum compensation for material damage rises from EUR 3.3 million to EUR 5 million.
How quickly will compensation be paid?
Processing times for claims will shorten. Processing of claims must now begin within seven days of the claim arriving, i.e. when the action is instituted. The decision on the claim must be given within one month of it being instituted. Should the decision on the claim take over one month, the claimant is to be paid interest on the delayed payment. If the case is delayed by such matters as establishing liability, the insurance company must give the claimant a reason for why the handling the claim has been delayed within three months.
Who compensates the innocent party if the other party has failed to insure their vehicle?
The Finnish Motor Insurer's centre continues to compensate the damages to the innocent party. The compensation is equivalent to the amount it would have been if the vehicles had had valid insurance.
How claims histories are taken into account better?
Under the new law, insurance companies have more flexibility in determining the basis calculation of insurance premiums. For example, it's be possible to take the claims history of one vehicle into account in pricing the insurance for a number of vehicles.
As before, the law obligates insurance companies to take a person's claims history into account in insurance premiums.
What effect does the law have on cases where a vehicle has multiple users? Whose claims history is be taken into account when determining the premium?
The price of motor liability insurance is not only determined by the claims history. It is instead calculated from several of risk factors known as tariff factors. The price is affected by factors relating to both the driver and the vehicle.
The reform of the Act governing motor liability does not change the way these factors are assessed, but continues to be based on calculated actual risks.
In principle, the risk factors related to the user, including their history, are assessed according to the main user of the vehicle (in practice the owner and/or holder of the vehicle). If the vehicle has several holders, it is possible in insurance companies' products to take the claims histories and other risk factors related to the users into account.
Claims history data are specific to each individual policyholder, so they can no longer be transferred to another person. However, when the insurance premium is determined, the insurance company may also take into account the claims history of a vehicle owned or controlled by the client's spouse. This is possible in situations where, for example, both spouses have used the vehicle or the vehicle will also be used by the policyholder's spouse. Each company decides for themselves how they use the claims history data and whether they take into account the data of more than one person.
Claims history data are specific to each individual policyholder. Does this mean that, should an accident occur with one vehicle, this will also have effect on the bonuses of the policyholder's other vehicles?
Not necessarily. It depends of the insurance terms and conditions of the company concerned. Check with your own insurance company.
Can a company insure its whole fleet with one insurance policy, or does each vehicle have to be insured separately?
The new law enables companies with a registered Business ID to insure their whole fleet with one policy, without distinguishing separate vehicles. This is known as group motor liability insurance. However, insurance companies are not obliged to grant group policies. These can be agreed upon separately. In practice, this kind of solution is best suited to large freight forwarding companies or similar that have large fleets of vehicles.
Does the green card area change as a result of the new law?
No, it does not. However for countries outside the EEA the insurance can limit its area of validity. Always check with your own insurance company your insurance cover before beginning a trip.
What do you need to remember when travelling abroad?
Always check your insurance cover for at least your motor liability and travel insurance. There could be differences in insurance cover depending on the country you are travelling to. For example, not all countries have the same cover for the driver as in Finland (i.e. where the driver causing the accident receives compensation for their personal injuries). So remember to check whether you need supplementary insurance.
In particular, when travelling outside the green card area it is important to make sure you have enough insurance cover.
Why is motor liability insurance obligatory?
Motor liability insurance safeguards the innocent party's legal protection and compensation. The protection given by motor liability insurance in the new law remains as broad as before.
When compared internationally, Finland has very comprehensive motor liability insurance cover. Not even all the green card countries have cover for the driver (i.e. where the driver causing the accident receives compensation for their personal injuries).
The risk of accident when in traffic is bigger than in many other areas of life. Statutory motor liability insurance gives comprehensive insurance cover. It compensates the personal injuries of both the innocent party and the party causing the accident. The innocent party who has been injured is covered both for personal injury and material damage. Motor liability insurance gives comprehensive liability insurance coverage also to the party causing the accident.
The fact that motor liability insurance is obligatory, that is to say statutory, is also due to international legislation, i.e. the Motor Insurance Directive.
What are the benefits of voluntary comprehensive insurance?
Motor liability insurance does not cover personal injury and material damage suffered by the owner or holder of the vehicle that caused the accident. This damage can be compensated through voluntary vehicle insurance, i.e. comprehensive insurance. In addition, with comprehensive insurance there is the possibility to have extra cover against vandalism, fire or theft.
How does the new law affect the bonus system of insurance companies?
The new Act governing motor liability insurance does not oblige companies to change their bonus systems. On the other hand, the law enables more flexible utilisation of claims histories.
What is the law on the Finnish Motor Insurers' Centre, what changes are there?
The previously separate decree has now been integrated into the new Act governing motor liability insurance. The act obligates companies granting motor liability insurance to be members of the Finnish Motor Insurers' Centre (LVK) as well laying down provisions for the administration and funding of the centre. In addition, the State Treasury will become a member of LVK.
The new law states that LVK no longer determines the payment for failing to take motor liability insurance (compensation fee), but it is now done by the State Treasury based on a recommendation by LVK.
What kind of claims LVK compensates in future?
LVK continues to compensate traffic accidents caused by uninsured, unknown and foreign vehicles as well as reindeer damage caused by vehicles to the owners of the reindeer.
As a result of the new law, LVK compensates damage caused by vehicles that have been freed from their insurance obligation. This task belonged to the State Treasury before.
In addition, LVK continues to compensate damage in those situations in which a vehicle's motor liability insurance has been cancelled as a consequence of the vehicle having been stolen.
How have self-driving cars been taken into account in the new law?
As regards policy holders and those involved in accidents, this issue has in practice no bearing as they will in any case be compensated primarily from motor liability insurance.
The new law makes it possible for the manufacturer of the whole vehicle or part of it to be liable for compensation of a traffic accident, in accordance with the Product Liability Act. In practice, the compensation can be directed to the manufacturer in those situations where the accident is not caused by the driver but by e.g. a vehicle defect or programming fault.
Experts in total reform of the Act governing motor liability insurance at the Finnish Motor Insurers' Centre:
Load the new act governing motor liability insurance